THE WORLD'S AUTHORITY ON PIZZA PMQ.COM. Strange Bedfellows. The after-party never ends for the marketing madmen of Mikey's Late Night Slice PAGE 32

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1 THE WORLD'S AUTHORITY ON PIZZA PMQ.COM Strange Bedfellows The after-party never ends for the marketing madmen of Mikey's Late Night Slice PAGE 32

2 Precinct Pizza has always offered delivery to its customers, but owner Rick Drury recently started splitting the service between his in-house team and third-party providers to see if it would save money. Emos vendit doluptatem eiur aut laccus, simus se estium que precatem atiist qui delignienis prat raturi quidus, si velitem nim et molupta sperore culparchil

3 The Third-Party Wave P A R T 2 The owner of Precinct Pizza looks at the advantages of splitting deliveries between your own in-house team and a third-party company. By Rick Drury Photos provided by Precinct Pizza This article is the second of a two-part series about Rick Drury s experiences with third-party delivery. In last month s article ( The Third-Party Wave, Part 1 ), I discussed the pros and cons of using an outside delivery source for your pizzeria. I noted that third-party companies can help eliminate or reduce your costs for employing, training and insuring drivers and save you some hassle in scheduling drivers and dealing with customer complaints, while allowing you to get your pizza into more customers hands. On the other hand, you give up a substantial percentage of each sale to the third-party company. You also may lose that all-important personal connection with your customer, and you ll no longer have as much control over the quality of your delivered product and how the drivers represent your brand, to name a few of the disadvantages. My restaurant, Precinct Pizza in Tampa, Florida, employs an in-house delivery staff and also uses an outside delivery service. It has worked pretty well for us so far. Would splitting deliveries be a good idea for your pizzeria, too? That s what we re going to consider in this month s article. January/February 2017 pmq.com 59

4 Rick Drury operates one of the country s busiest pizzerias today, but, as depicted in the photograph on the right, he was previously a paramedic in New York who served as a first responder when the World Trade Center collapsed during the 9/11 attacks. By continuing to use our own in-house delivery service in aition to a third-party service, we saved about $85,000, compared to using only an outside delivery service. EXPANDING YOUR CUSTOMER BASE At Precinct Pizza, we have offered delivery from the day we opened 10 years ago, but I was approached by an outside delivery company about five years ago. They had done their own polling around Tampa to identify the most popular pizzeria among the locals, and Precinct Pizza was the overwhelming favorite. For this reason, they wanted Precinct Pizza to be their go-to Italian restaurant. They made their sales pitch, but I told them I thought the whole idea was silly, since we already offered delivery to our customers. The company insisted, however, that they would not take anything away from my current delivery business they would only a to it. I agreed to give it a shot, and they were right. The customers they received orders from were not customers I recognized (I could tell because when the orders came through to my store, they often displayed the delivery aresses on the food tickets). During my partnership with this third-party company, my in-house delivery business never declined; it actually increased, and so did the orders from the outside delivery company. In 10 years, Precinct Pizza has enjoyed nine positive sales years, and our sales keep going up. (The only negative sales year was due to BP s oil spill in 2010, which killed our summer business; otherwise, we undoubtedly would have enjoyed 10 straight positive sales years). RUNNING THE NUMBERS Since that initial rewarding experience with a third-party delivery company, Precinct Pizza has expanded its outside food delivery with UberEATS and Amazon Prime Now Restaurant Delivery. If they keep their promises and advertise to get new customers for my restaurant through their own marketing, I don t believe I will lose any of my current business to them. Now, remember, when you re working with a thirdparty delivery company, you give up a percentage of each sale to that company. In our case, we lose 25% to 30%, depending on the provider. So if a customer wants to 60 PMQ Pizza Magazine The Pizza Industry s Business Monthly

5 After dividing his delivery business between in-house team members like Amanda Horton (above) and third-party providers, Precinct Pizza s Rick Drury says his in-house delivery continued to thrive and his overall orders increased. order Precinct Pizza tonight, I would obviously want them to order directly through the store, because if they order through the outside delivery company, I lose 25% to 30% of the profit. But let s take a closer look at the numbers. As I said, I m currently splitting deliveries between my in-house team and outside third-party providers. If I had contracted out 100% of Precinct Pizza s delivery business a total of $935,701 in sales to outside delivery services in 2015, we would have given up $280,710 in third-party delivery fees. I also calculated that payroll for the drivers that year was $168,452, and the payroll taxes for those drivers amounted to $20,292. In aition, we spent about $2,000 on uniforms, raincoats, hot bags and other delivery items. The Non-Owned & Hired insurance premium cost for that year was about $5,000. So if we d gone 100% with outside food delivery companies in 2015, the numbers would look like this: Revenue lost due to fees: $280,710 Savings on driver salaries: $168,452 Savings on driver payroll taxes: $20,292 Savings on equipment expenditures: $2,000 Savings on insurance premiums: $5,000 Net loss: $84,966 As you can see, we would end up losing money if we turned over all deliveries to a third-party company. By continuing to use our own in-house delivery service in aition to a third-party service, we saved about $85,000, compared to the model of using only an outside delivery service. Once your delivery sales go below $250,000 a year, it may make financial sense to use only an outside food delivery service if one is available. USING THIRD-PARTY DELIVERY EXCLUSIVELY If your pizzeria does lower delivery sales than mine, the savings of in-house delivery will decrease. At a certain point, it may actually make sense to do away with in-house delivery service altogether, especially if you are in a small market and can work with an outside delivery service that s reliable and professional. Let s assume your driver labor percentages, insurance costs, taxes and expenses are about the same as mine. If you generate $750,000 annually in delivery sales, you would save about $68,000 by splitting your deliveries with an outside company rather than letting that company handle all of your deliveries. If you make $400,000 in deliveries, you save about $33,000. Once your delivery sales go below $250,000 a year, it may make financial sense to use only an outside food delivery service if one is available. The time and money that you spend training, scheduling and insuring your drivers, plus other delivery-related expenses, aren t worth the small amount of money you d save in keeping an in-house delivery team. For Precinct Pizza, due to our delivery volume, it s a no-brainer the numbers show that we should not give 62 PMQ Pizza Magazine The Pizza Industry s Business Monthly

6 up our in-house delivery service. Not included in the profitability scenario listed above is the priceless aitional work our professional drivers do for us. They often distribute menus to hotels, businesses and apartment buildings when they have deliveries in those areas; drivers for outside delivery companies won t do that. Our drivers also help fold boxes, wash dishes and occasionally assist with prep when they re not delivering. Again, you won t get that kind of work from a third-party company s drivers. But if your delivery sales do not exceed $250,000 a year, you should definitely crunch the numbers and find out if going 100% with outside food-delivery companies is right for you. In our first week with UberEATS, Precinct Pizza fulfilled 294 orders, for a total of $8, Thirty percent of that amount, or $2,477.45, went to UberEATS. I have contacted many of the major outside delivery companies and, from my research, I found that none of them allow their customers to use coupons or any other kind of discount when they place their orders. So you may be giving up 30% of each order, but these third-party companies customers are paying full price on all menu items. If you are nervous about giving up that 30%, you may want to run a food cost analysis on your current menu and determine if it s time to raise your prices a little bit. That would also offset some of the costs of giving up 30% per order to an outside delivery company. In conclusion, third-party delivery can boost your sales, but it s not always a good idea to rely on these companies exclusively. If you already have an in-house delivery team, think carefully and do the math before you let them go. Splitting deliveries with a third-party provider may be the better option for you! Rick Drury is the owner of Precinct Pizza in Tampa, Florida. Rick has more than a quartercentury of pizza experience, and Precinct Pizza has been recognized as one of the busiest pizzerias in the country. January/February 2017 pmq.com 63